BlackBerry phones on display at a shop in Mumbai. The Indian government is considering a restriction on some services on the smartphone Photograph: Rajanish Kakade/AP

India has rejected a proposal by Research In Motion, the maker of the BlackBerry smartphone, to allow security authorities limited access to corporate email used by its customers.

According to an internal memo leaked to India's Economic Times newspaper, India's telecommunications ministry said security agencies had been unable to access communications sent via corporate emails and on the device's BlackBerry Messenger service.

India had threatened RIM with a blackout on BlackBerry communications in the country, as authorities pushed for access to messages sent between devices, citing fears that the level of encryption on the handsets could aid terrorist activity. The Canada-based manufacturer, which has approximately 800,000 customers in India, appeared to accede to government demands by allowing access to the Messenger service at the beginning of September, while talks about access to the high-security corporate email service continued.

The news will bring a fresh blow to RIM amid reports of progress between the two sides. India had said it would test the feasibility of RIM's concessions throughout October and November. The internal memo reportedly showed RIM to have told the Indian telecommunications ministry that it cannot – for technical reasons – hand authorities a key to access encrypted emails.

RIM's high security is obtained because it uses 256-bit encryption on messages and data sent between its servers and devices. It is thought that it could not give the Indian government unfettered access to some devices, because that would imply supplying the codes which could unlock any message.

Speaking to the Guardian last month, Leif-Olof Wallin, a vice president of the IT research company Gartner, said that the complexity and range of security solutions offered by RIM may be the source of friction and misunderstanding with government authorities. "What seems to be the big challenge is that lots of BlackBerry service and infrastructure is not very well understood by the regulatory authorities or by its users," Wallin said. "Although physically it is the same device, it can be used in lots of different scenarios."

RIM today declined to comment, though the company has previously said its negotiations with governments over increased access to data transmitted between BlackBerry devices would abide to four principles: that it was legal, that there would be "no greater access" to BlackBerry services than other services, that there would be no changes in the security for Enterprise customers, and that it would not make "specific deals for specific customers".

Indian security authorities had also reportedly issued a 22 September deadline for mobile operators to begin hosting servers inside the country, placing data transferred across the carriers' networks inside local jurisdictions.

India is the second largest mobile phone market in the world, behind China. Informa Telecoms & Media forecasts that there will be more than 600,000 BlackBerry sales in India this year and that India's smartphone market will have reached approximately 12m – a figure forecast to grow to 40m by the end of 2015.